FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Marchant Ltd. reported the following abbreviated statement of financial position and statement of income for 2024.
MARCHANT LTD.
Comparative Statement of Financial Position
Dec. 31, 2024
Dec. 31, 2023
Cash
$ 60,000
$ 70,000
Accounts receivable
120,000
140,000
Inventory
320,000
280,000
Property, plant, and equipment
700,000
650,000
Less: Accumulated depreciation
(260,000)
(230,000)
Total assets
$940,000
$910,000
Accounts payable
$ 82,000
$ 85,000
Wages payable
8,000
10,000
Loan payable
350,000
400,000
Common shares
200,000
150,000
Retained earnings
300,000
265,000
Total liabilities and shareholders’ equity
$940,000
$910,000
MARCHANT LTD.
Statement of Income
For the year ended December 31, 2024
Sales revenue
$450,000
Cost of goods sold
240,000
Gross profit
210,000
Other expenses:
Supplies expense
$ 15,000
Depreciation expense
30,000
Wages expense
100,000
Other operating expenses
5,000
Interest expense
24,000
174,000
36,000
Other income
8,000
Net income
$ 44,000
Required
Prepare a statement of cash flows for Marchant Ltd. for the year ended December 31, 2024, using the indirect method.
Determine the cash flows from operating activities using the direct method.
Was the cash flow generated by the company’s operating activities during the year larger or smaller than the net income? Should these two amounts be the same? Explain.
Was the change in the amount of working capital during the year the same amount as cash from operating activities? Should these two amounts be the same? Explain. (Hint: Working capital = current assets − current liabilities.)
Transcribed Image Text:AP5-9B (Preparation of statement of cash flows) Marchant Ltd. reported the following
abbreviated statement of financial position and statement of income for 2024.
MARCHANT LTD.
Comparative Statement of Financial Position
Cash
Accounts receivable
Inventory
Property, plant, and equipment
Less: Accumulated depreciation
Total assets
Accounts payable
Wages payable
Loan payable
Common shares
Retained earnings
Total liabilities and shareholders'
equity
Dec. 31,
2024
$ 60,000
120,000
320,000
700,000
(260,000)
$940,000
$ 82,000
8,000
350,000
200,000
300,000
$940,000
Dec. 31,
2023
$70,000
140,000
280,000
650,005
(230,000)
$910,000
$ 85,000
10,000
400,000
150,000
265,000
$910,000
Transcribed Image Text:MARCHANT LTD.
Statement of Income
For the year ended December 31, 2024
Sales revenue
Cost of goods sold
Gross profit
Other expenses:
Supplies expense
Depreciation expense
Wages expense
Other operating expenses
Interest expense
Other income
Net income
$ 15,000
30,000
100,000
5,000
24,000
$450,000
240,000
210,000
174,000
36,000
8,000
$44,000
Required
a. Prepare a statement of cash flows for Marchant Ltd. for the year ended December 31, 2024,
using the indirect method.
b. Determine the cash flows from operating activities using the direct method.
c. Was the cash flow generated by the company's operating activities during the year larger or
smaller than the net income? Should these two amounts be the same? Explain.
d. Was the change in the amount of working capital during the year the same amount as cash
from operating activities? Should these two amounts be the same? Explain. (Hint: Working
capital = current assets - current liabilities.)
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